How Rhapsody Became A Top Tier Player Again

Rhapsody today announced reaching 2.5 million total subscribers across their unlimited and UnRadio offerings. While not in the same scale as Spotify’s 15 million, it nonetheless places Rhapsody as the fourth largest subscriber base globally and approximately 10% of the global total.

Rhapsody spent most of the second part of the 2000’s treading water, never really able to break out of a solid niche of between 750,000 and 880,000 subscribers. Rhapsody was doing its best to run a sustainable business but because it wasn’t blowing vast amounts of cash on customer acquisition (either via marketing or having a free tier) it was seeing most of its new user growth cancelled out by churn. But even with this measured approach such is the nature of digital music margins that it still lost money, lots of it.

Enter investment firm Columbus Nova who acquired an undisclosed stake in Rhapsody in September 2013. A reorg and a repositioning process followed paving the way for strong subscriber growth. Rhapsody had 1.5 million subscribers one year ago. If it continues to grow at its present rate it should hit 3 million by July this year. And if it sustains that growth into the start of 2016 it could find itself the second biggest subscription service globally. Current number two Deezer appears to be slowing so 2nd place could be a realistic target for next year. Quite a turn around for a service that looked like it was falling by the wayside 5 years ago.

Rhapsody created the streaming subscription marketplace. I remember back in the early and mid 2000’s when I was a Jupiter analyst, forever trumpeting the subscription model. In fact, along with my fellow Jupiter music analysts David Card and Aram Sinnreich, we took a lot of flak for our forecasts that predicted subscriptions would be the future of digital music. Granted we made our bet the best part of a decade before the market transpired but Rhapsody was there in market doing pretty much what subscription services are doing today. It deserves credit for having created a market and now once again for a newly found relevancy in the contemporary marketplace.

Postscript: Intrigued I decided to look up one of my old Jupiter music forecasts to see how wrong I was and I had a nice surprise. In the 2007 Jupiter European Music Model I had European subscription revenue at €484.2 million by 2012. The actual number was €420.2 million. That sound you can hear is me patting myself on the back.